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Applied Materials Announces First Quarter 2024 Results

Written by Customer Service on . Posted in Earnings Releases And Operating Results.

  • Revenue $6.71 billion, flat year over year
  • GAAP operating margin 29.3 percent and non-GAAP operating margin 29.5 percent, up 0.1 points and flat year over year, respectively
  • GAAP EPS $2.41 and non-GAAP EPS $2.13, up 19 percent and 5 percent year over year, respectively
  • Generated $2.33 billion in cash from operations

SANTA CLARA, Calif., Feb. 15, 2024 (GLOBE NEWSWIRE) — Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its first quarter ended Jan. 28, 2024.

First Quarter Results

Applied generated revenue of $6.71 billion. On a GAAP basis, the company reported gross margin of 47.8 percent, operating income of $1.97 billion or 29.3 percent of net revenue, and earnings per share (EPS) of $2.41.

On a non-GAAP basis, the company reported gross margin of 47.9 percent, operating income of $1.98 billion or 29.5 percent of net revenue, and EPS of $2.13.

The recently disclosed change in useful lives of certain property, plant and equipment increased GAAP and non-GAAP EPS by $0.03.

The company generated $2.33 billion in cash from operations and distributed $966 million to shareholders including $700 million in share repurchases and $266 million in dividends.

“Applied Materials delivered strong results in the first quarter of fiscal 2024 and has outperformed our markets for the fifth consecutive year,” said Gary Dickerson, President and CEO. “Our leadership positions at key semiconductor inflections support continued outperformance as customers ramp next-generation chip technologies critical to AI and IoT over the next several years.”

Results Summary

 Q1 FY2024 Q1 FY2023 Change
 (In millions, except per share amounts and percentages)
Net revenue$6,707  $6,739  —
Gross margin 47.8%  46.7% 1.1 points
Operating margin 29.3%  29.2% 0.1 points
Net income$2,019  $1,717  18%
Diluted earnings per share$2.41  $2.02  19%
Non-GAAP Results     
Non-GAAP gross margin 47.9%  46.8% 1.1 points
Non-GAAP operating margin 29.5%  29.5% —
Non-GAAP net income$1,782  $1,724  3%
Non-GAAP diluted EPS$2.13  $2.03  5%
Non-GAAP free cash flow$2,096  $1,983  6%
          

A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also “Use of Non-GAAP Financial Measures” section.

Business Outlook

In the second quarter of fiscal 2024, Applied expects net revenue to be approximately $6.50 billion, plus or minus $400 million. Non-GAAP diluted EPS is expected to be in the range of $1.79 to $2.15.

This outlook for non-GAAP diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes the normalized tax benefit of share-based compensation of $0.01 per share and includes a net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax-related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.

First Quarter Reportable Segment Information

Effective in the first quarter of fiscal 2024, management began including share-based compensation expense in the evaluation of reportable segments’ performance. Prior-year numbers have been recast to conform to the current-year presentation.

Semiconductor SystemsQ1 FY2024 Q1 FY2023
 (In millions, except percentages)
Net revenue$4,909  $5,162 
Foundry, logic and other 62%  77%
DRAM 34%  13%
Flash memory 4%  10%
Operating income$1,744  $1,855 
Operating margin 35.5%  35.9%
Non-GAAP Results  
Non-GAAP operating income$1,754  $1,864 
Non-GAAP operating margin 35.7%  36.1%

Applied Global ServicesQ1 FY2024 Q1 FY2023
 (In millions, except percentages)
Net revenue$1,476  $1,369 
Operating income$417  $345 
Operating margin 28.3%  25.2%
Non-GAAP Results  
Non-GAAP operating income$417  $345 
Non-GAAP operating margin 28.3%  25.2%

Display and Adjacent MarketsQ1 FY2024 Q1 FY2023
 (In millions, except percentages)
Net revenue$244  $167 
Operating income$25  $3 
Operating margin 10.2%  1.8%
Non-GAAP Results  
Non-GAAP operating income$25  $3 
Non-GAAP operating margin 10.2%  1.8%
        

Use of Non-GAAP Financial Measures

Applied provides investors with certain non-GAAP financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring and severance charges and any associated adjustments; impairments of assets; gain or loss, dividends and impairments on strategic investments; certain income tax items and other discrete adjustments. On a non-GAAP basis, the tax effect related to share-based compensation is recognized ratably over the fiscal year. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.

Management uses these non-GAAP financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied’s ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast and related slide presentation will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.

Forward-Looking Statement

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation and cash deployment strategies, our investment and growth strategies, our development of new products and technologies, our business outlook for the second quarter of fiscal 2024 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products, our ability to meet customer demand, and our suppliers’ ability to meet our demand requirements; global economic, political and industry conditions, including rising inflation and interest rates; the implementation and interpretation of new export regulations and license requirements, and their impact on our ability to export products and provide services to customers and on our results of operations; global trade issues and changes in trade and export license policies; our ability to obtain licenses or authorizations on a timely basis, if at all; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the effects of geopolitical turmoil or conflicts, and of regional or global health epidemics; acquisitions, investments and divestitures; changes in income tax laws; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; our ability to ensure compliance with applicable law, rules and regulations and other risks and uncertainties described in our SEC filings, including our recent Forms 10-K and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible a better future. Learn more at www.appliedmaterials.com.

Contact:

Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977

 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 Three Months Ended
(In millions, except per share amounts)January 28,
2024		 January 29,
2023
Net revenue$6,707  $6,739 
Cost of products sold 3,503   3,594 
Gross profit 3,204   3,145 
Operating expenses:   
Research, development and engineering 754   771 
Marketing and selling 207   197 
General and administrative 276   207 
Total operating expenses 1,237   1,175 
Income from operations 1,967   1,970 
Interest expense 59   59 
Interest and other income (expense), net 395   50 
Income before income taxes 2,303   1,961 
Provision for income taxes 284   244 
Net income$2,019  $1,717 
Earnings per share:   
Basic$2.43  $2.03 
Diluted$2.41  $2.02 
Weighted average number of shares:   
Basic 831   845 
Diluted 837   849 

 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)January 28,
2024		 October 29,
2023
ASSETS   
Current assets:   
Cash and cash equivalents$        6,854          $        6,132         
Short-term investments         638                   737         
Accounts receivable, net         4,700                   5,165         
Inventories         5,646                   5,725         
Other current assets         1,344                   1,388         
Total current assets         19,182                   19,147         
Long-term investments         2,910                   2,281         
Property, plant and equipment, net         2,826                   2,723         
Goodwill         3,732                   3,732         
Purchased technology and other intangible assets, net         283                   294         
Deferred income taxes and other assets         2,607                   2,552         
Total assets$        31,540          $        30,729         
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Short-term debt$        100          $        100         
Accounts payable and accrued expenses         3,829                   4,297         
Contract liabilities         3,147                   2,975         
Total current liabilities         7,076                   7,372         
Long-term debt         5,462                   5,461         
Income taxes payable         850                   833         
Other liabilities         723                   714         
Total liabilities         14,111                   14,380         
Total stockholders’ equity         17,429                   16,349         
Total liabilities and stockholders’ equity$        31,540          $        30,729         

 
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
 Three Months Ended
(In millions)January 28,
2024		 January 29,
2023
Cash flows from operating activities:   
Net income$2,019  $1,717 
Adjustments required to reconcile net income to cash provided by operating activities:   
Depreciation and amortization 91   120 
Share-based compensation 170   148 
Deferred income taxes (72)  (21)
Other (235)  7 
Net change in operating assets and liabilities 352   299 
Cash provided by operating activities 2,325   2,270 
Cash flows from investing activities:   
Capital expenditures (229)  (287)
Cash paid for acquisitions, net of cash acquired —   (20)
Proceeds from sales and maturities of investments 531   414 
Purchases of investments (749)  (406)
Cash used in investing activities (447)  (299)
Cash flows from financing activities:   
Proceeds from commercial paper 100   298 
Repayments of commercial paper (100)  (100)
Common stock repurchases (700)  (250)
Tax withholding payments for vested equity awards (192)  (136)
Payments of dividends to stockholders (266)  (220)
Repayments of principal on finance leases 1   (10)
Cash used in financing activities (1,157)  (418)
Increase (decrease) in cash, cash equivalents and restricted cash equivalents 721   1,553 
Cash, cash equivalents and restricted cash equivalents—beginning of period 6,233   2,100 
Cash, cash equivalents and restricted cash equivalents — end of period$6,954  $3,653 
    
Reconciliation of cash, cash equivalents, and restricted cash equivalents   
Cash and cash equivalents$6,854  $3,547 
Restricted cash equivalents included in deferred income taxes and other assets 100   106 
Total cash, cash equivalents, and restricted cash equivalents$6,954  $3,653 
    
Supplemental cash flow information:   
Cash payments for income taxes$139  $69 
Cash refunds from income taxes$2  $4 
Cash payments for interest$34  $34 

 
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other

(In millions)Q1 FY2024 Q1 FY2023
Unallocated net revenue$78  $41 
Unallocated cost of products sold and expenses (297)  (274)
Total$(219) $(233)
        

Additional Information

 Q1 FY2024 Q1 FY2023
Net Revenue by Geography (In millions) 
United States$759  $1,051 
% of Total 11%  16%
Europe$410  $573 
% of Total 6%  8%
Japan$565  $456 
% of Total 9%  7%
Korea$1,231  $1,293 
% of Total 18%  19%
Taiwan$559  $1,968 
% of Total 8%  29%
Southeast Asia$186  $253 
% of Total 3%  4%
China$2,997  $1,145 
% of Total 45%  17%
    
Employees (In thousands)   
Regular Full Time 34.5   33.9 

 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
 Three Months Ended
(In millions, except percentages)January 28,
2024		 January 29,
2023
Non-GAAP Gross Profit   
GAAP reported gross profit$3,204  $3,145 
Certain items associated with acquisitions1 7   7 
Non-GAAP gross profit$3,211  $3,152 
Non-GAAP gross margin 47.9%  46.8%
Non-GAAP Operating Income   
GAAP reported operating income$1,967  $1,970 
Certain items associated with acquisitions1 11   11 
Acquisition integration and deal costs 3   6 
Non-GAAP operating income$1,981  $1,987 
Non-GAAP operating margin 29.5%  29.5%
Non-GAAP Net Income   
GAAP reported net income$2,019  $1,717 
Certain items associated with acquisitions1 11   11 
Acquisition integration and deal costs 3   6 
Realized loss (gain), dividends and impairments on strategic investments, net (1)  (4)
Unrealized loss (gain) on strategic investments, net (280)  (4)
Income tax effect of share-based compensation2 (26)  (14)
Income tax effects related to intra-entity intangible asset transfers 22   17 
Resolution of prior years’ income tax filings and other tax items 33   (5)
Income tax effect of non-GAAP adjustments3 1   — 
Non-GAAP net income$1,782  $1,724 

1These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
2GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis.
3Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.

 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
 Three Months Ended
(In millions, except per share amounts)January 28,
2024		 January 29,
2023
Non-GAAP Earnings Per Diluted Share   
GAAP reported earnings per diluted share$2.41  $2.02 
Certain items associated with acquisitions 0.01   0.01 
Acquisition integration and deal costs —   0.01 
Unrealized loss (gain) on strategic investments, net (0.33)  — 
Income tax effect of share-based compensation (0.03)  (0.02)
Income tax effects related to intra-entity intangible asset transfers 0.03   0.02 
Resolution of prior years’ income tax filings and other tax items 0.04   (0.01)
Non-GAAP earnings per diluted share$2.13  $2.03 
Weighted average number of diluted shares 837   849 

 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
 Three Months Ended
(In millions, except percentages)January 28,
2024		 January 29,
2023
Semiconductor Systems Non-GAAP Operating Income   
GAAP reported operating income$1,744  $1,855 
Certain items associated with acquisitions1 10   9 
Non-GAAP operating income$1,754  $1,864 
Non-GAAP operating margin 35.7%  36.1%
Applied Global Services Non-GAAP Operating Income   
GAAP reported operating income$417  $345 
Non-GAAP operating income$417  $345 
Non-GAAP operating margin 28.3%  25.2%
Display and Adjacent Markets Non-GAAP Operating Income   
GAAP reported operating income$25  $3 
Non-GAAP operating income$25  $3 
Non-GAAP operating margin 10.2%  1.8%

1These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
  

Note: The reconciliation of GAAP and non-GAAP segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
 
 Three Months
Ended
(In millions, except percentages)January 28, 2024
  
GAAP provision for income taxes (a)$284 
Income tax effect of share-based compensation 26 
Income tax effects related to intra-entity intangible asset transfers (22)
Resolutions of prior years’ income tax filings and other tax items (33)
Income tax effect of non-GAAP adjustments (1)
Non-GAAP provision for income taxes (b)$254 
  
GAAP income before income taxes (c)$2,303 
Certain items associated with acquisitions 11 
Acquisition integration and deal costs 3 
Realized loss (gain), dividends and impairments on strategic investments, net (1)
Unrealized loss (gain) on strategic investments, net (280)
Non-GAAP income before income taxes (d)$2,036 
  
GAAP effective income tax rate (a/c) 12.3%
  
Non-GAAP effective income tax rate (b/d) 12.5%

 
UNAUDITED RECONCILIATION OF NON-GAAP FREE CASH FLOW
 
 Three Months Ended
(In millions)January 28,
2024		 January 29,
2023
Cash provided by operating activities$2,325  $2,270 
Capital expenditures (229)  (287)
Non-GAAP free cash flow$2,096  $1,983 

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